Intel’s ongoing efforts to revitalize its business received a major boost this week, as the company announced key partnerships and strategic shifts.
Shares of Intel surged in early Tuesday trading after unveiling a multibillion-dollar deal with Amazon Web Services (AWS) and a lucrative US government contract, signaling a potential turnaround for the struggling chipmaker.
Intel, which has faced significant challenges aligning its legacy business with a focus on high-end chip manufacturing, has seen its stock plummet nearly 60% this year. Despite these setbacks, the company is working to reposition itself as a leader in artificial intelligence (AI) and contract chip manufacturing under the leadership of CEO Pat Gelsinger.
The AWS partnership, announced late Monday, is part of a long-term collaboration to produce custom AI chips using Intel’s advanced 18A process technology.
“This is a very discerning customer who has very sophisticated design capabilities,” Gelsinger said.
He also emphasized the significance of the deal for Intel’s future. The deal provides a welcome boost to Intel’s market value, with shares rising as much as 8% following the announcement.
In addition to the AWS agreement, Intel confirmed it is eligible for up to $3 billion in US government funding to manufacture advanced chips for the Department of Defense, reinforcing its role in national security efforts. The funding is part of the Secure Enclave project, which aims to ensure a stable supply of cutting-edge chips for defense and intelligence applications.
These developments come as Intel also prepares to spin off its foundry business into an independent subsidiary, a move that analysts believe could be crucial for the company’s future growth. The foundry unit, which will focus on manufacturing chips for other companies, is expected to be a key growth driver, particularly as competitors like Nvidia and AMD continue to dominate the PC and data center markets.
Intel’s second-quarter earnings, however, highlighted ongoing challenges, with adjusted profits falling short of expectations and revenue dipping to $12.8 billion. The company has announced plans to cut its global workforce by 15% and suspend its quarterly dividend as part of its cost-cutting efforts.
Despite these hurdles, analysts see potential in Intel’s pivot to AI and its growing foundry business, particularly with high-profile customers like AWS and Microsoft. The company’s stock rose 6.9% in premarket trading on Tuesday, with investors hopeful that Gelsinger’s turnaround plan could finally help Intel regain its footing in the competitive semiconductor industry.
With input from Yahoo Finance, Mint, and the Street.
